A man walks past an advertisement promoting China’s yuan, US dollar and Euro exchange services at foreign exchange store in Hong Kong, China, on August 13, 2015. (REUTERS/Tyrone Siu)
The pan-European FTSEurofirst 300 index was up 1.2 percent at 1,534.84 by 1345 GMT.
Automakers and luxury goods stocks, among the worst hit this week, were among the biggest gainers after China’s central bank said there was no reason for the yuan to fall further.
“I think markets massively misunderstood what happened in China,” Jefferies strategist Sean Darby said.
“The exchange rate in China is moving to a free float. There was too much hype over the word ‘devaluation’ and markets are realizing that after 48 hours,” he said.
European equities hit their lowest level in a month in the wake of China’s move to allow its currency to fall. But by Thursday there were signs the pace of decline was slowing after the central bank set a midpoint for the currency that was not as low as expected.
Better-than-expected profits from shipping and oil group Moller Maersk and a positive earnings outlook from travel firm TUI sent shares in the two companies up around 6 percent.
Nestle reported worse-than-expected half-year sales, hurt by a recall of its Maggi noodles in India, though the Swiss food group’s shares rose 3.7 percent after it said it maintained its 2015 outlook.
Among standout losers, shares in Germany’s No. 2 utility RWE dropped 7.6 percent after it posted weaker-than-expected profits in the first half, hit by a mix of low wholesale power prices, a small footprint in renewables and problems at its UK business.
“Conventional power generation was below our estimates, and the UK supply operations (Npower) were a major disappointment,” John Musk, analyst at RBC Capital Markets, said in a note.
Dutch insurer Aegon slumped 7.4 percent after it missed earnings forecasts.
While fears over Greece’s ability to avert financial ruin appear to have receded, the European Union moved to keep Greece on a tight rein after its latest bailout. Sources said the 85 billion euro deal will be reviewed by lenders in October and any discussion of debt relief will only come at a later stage. Greece’s Athex stock index edged 0.7 percent lower.